On January 1, Year 1, Big Co. concludes a contract with a customer ... On January 1, Big Co. makes a contract with a client to build a bridge on the client's land for $2,500,000. The bridge construction is expected to be completed by the end of the 3rd year. 

Using the input method based on costs incurred, Big determines that progress towards completion of the bridge is reasonably measurable. At contract inception, Big estimates the expected total cost of construction to be $1,700,000. Below are (1) actual costs incurred each year, (2) expected costs to complete construction, and (3) amounts billed to the customer: 

Year 1 Year 2 Year 3 

Annual costs 700,000 $ 500,000 $ 800,000 

Expected costs the following years 1.300.000 675. 000 0 Amounts invoiced to the customer (and paid by the customer) each year 700,000 950,000 850,000

How much gross profit from this contract is recognized by Big in the Year 3 income statement?

Answer rating: 100% (QA)

In this contract revenue is recognized over time and based on the progress toward complet... View the full answer